4. What types of Products are Reportable?

4.1. General Product Scope

Per SUP 17.1.4 R, firms must report details of any transaction they execute in:

  1. any financial instrument admitted to trading on a Regulated Market or a Prescribed Market (whether or not the transaction was carried out on such a market) ; or
  2. any OTC derivative the value of which is derived from or which is otherwise dependent upon an equity or debt related financial instrument (other than where it references a basket of securities or an index) which is admitted to trading on a Regulated Market or on a Prescribed Market.[1]SUP 17.1.4

FCA also requires firms to report RTOs (Receipt and Transmission of an Order) where they do not pass client details to their executing broker. Firms are therefore required to report all job-outs/give-ups to the FCA.

4.2. Exception for Commodity Derivatives, Interest Rate Derivatives and Foreign Exchange Derivatives

FCA have stated that firms do not need to provide reports for transactions in commodity derivatives, foreign exchange derivatives or interest rate derivatives (collectively referred to as “non-securities derivatives”). Following an agreement being reached between CESR and the EU Commission that regulators do not need to require firms to report transactions in non-securities derivatives admitted to trading on regulated markets. Rather, FCA will collect these transaction reports directly from LIFFE, the LME and ICE futures Europe[2]Under MiFID I reporting of client side transaction reports is super equivalent to MiFID I and is therefore at the option of each Competent Authority. Reporting of the exchange facing trades therefore meets the directives mandate. and will enable such information to be made available to other EU regulators should they require it.[3]MW issue 28 (June 2008)

For the avoidance of doubt, securitised instruments such as ETFs (Exchange Traded Funds) and ETCs (Exchange Traded Commodities) are reportable irrespective of whether they reference commodities or not as they are admitted to trading in their own right as securities.[4]TRUP v3, section 3.2b, page 9

4.3. Identifying Instruments Admitted to Trading on an EU Regulated Market

FCA have stated that firms are responsible for establishing an appropriate process for identifying what transactions are reportable to FCA.[5]MW issue 22 (August 2007) In order to identify if a transaction is reportable to the FCA two factors must be considered:

  • Does the entity executing the transaction have a reporting obligation?
  • Is the instrument traded or its underlying admitted to trading on a regulated market?

We should always be clear on which entities and branches within the firm have a reporting obligation. The difficult question is being able to establish whether an instrument is admitted to trading on a regulated or prescribed market. To answer this question we must have a current and accurate source of instrument reference data which includes a complete list of instruments admitted to EU regulated markets as well as AIM.

As reference data quality is very difficult to establish, particularly the completeness of the data, the FCA permits firms to report all their trades without filtering for non-reportable instruments.

4.4. The ESMA MiFID database

ESMA publishes an online MiFID database which contains details of:

  • equity instruments admitted to trading on a regulated market and are therefore reportable
  • approved central counterparties
  • regulated markets including identifying whether they are an Aii or an ISIN market
  • multilateral trading facilities
  • systematic internalisers

FCA have stated that they are content for firms to use this database to identify equity instruments admitted to trading on regulated markets.[6]MW issue 28 (June 2008) However firms have been advised to note that this database only contains details of shares admitted to trading on an EU Regulated Market and they will need to independently source details of other reportable instruments, i.e.:

  • debt instruments admitted to trading on a regulated market
  • equity and debt related derivatives admitted to trading on regulated markets;
  • equity and debt instruments admitted to trading on UK prescribed markets (AIM and IDX)[7]MW issue 28 (June 2008)
  • exchange traded funds and commodities
  • depository receipts

The ESMA database is updated by each competent authority. The CAs are meant to update each time there is a new instrument admitted to trading however, there is often a delay of a week or so.

Bearing the above in mind, the ESMA database can be used as a reference source if used cautiously.

4.5. Reportable Instrument File Sources

There are currently a number of vendors providing daily files of reportable instruments. These can be used to assess whether an instrument is reportable or not by simply seeing whether the instrument being assessed is included in the list of instruments in the file.

For securities and ISIN based derivatives this means assessing whether the ISIN code is in the list.
For Aii derivatives this will be a combination of the MIC code (is it an in-scope market) and the instruments product code. For Aii instruments the assessment would be used to identify whether the derivative being traded is an equity or bond based derivative, so as to remove from your reporting the non-securities derivatives (on exchange commodities, interest rate and FX derivatives).
To assist your firm’s assessment of reference data vendors, Kaizen can effect introductions and conduct due diligence where required.

4.5.1. LSE MiFID file

LSE provide files of MiFID reportable instruments. There are two separate files, a derivatives file and a non-derivatives file covering equity, fixed income, warrants and other types of security.

We have conducted due diligence on this file and believe it to be of an appropriate level of completeness to use to identify non-reportable instrument. This is most easily done for equity and debt instruments reported using an ISIN in the instrument identifier field.

On the other hand it is more difficult to establish that an OTC derivative is not reportable based on the ISIN shown in the underlying instrument identifier field. This is because an OTC instrument can reference multiple securities by a single issuer. As such CDSs for example, may reference the ISIN for a non-regulated market instrument in the underlying instrument identifier field whilst the CDS has as reference instruments all debt securities for that issuer of which one could be reportable. In this example, the single reportable instrument would make the CDS itself reportable. As such we do not recommend that the MiFID file is used for OTC derivatives without additional checks being in place to identify if the issuer has any reportable instruments in issue.

4.5.2. SIX reportability service

SIX provide a service whereby they identify reportable securities and the markets on which the instrument is admitted to trading. This service is charged on a per instrument basis and can therefore be more cost effective where only a small number of instruments are involved.

If your organisation already uses SIX for instrument static, is also possible that this information is already being provided. Where this is the case it would be simply a question of making the relevant fields available to the system undertaking the reportability assessment.

4.5.3. Interactive Data Corporation

Interactive Data Corporation (IDC) suggest that they have reference data to identify transaction reportable instruments. We have not assessed the quality of this data but would be happy to work with clients if they are looking at IDC as an option.

4.5.4. Considerations when assessing reportability of instruments

Under SUP 17 firms are required to identify reportable transactions and to submit these to the FCA before the end of the business day following trade execution.

Identifying reportable instruments (securities) can be quite tricky as any instrument that is admitted to trading on a regulated or prescribed market is reportable. OTC derivatives are also reportable where they reference a reportable security (with the exception of baskets of securities from more than one issuer and indices).

Firms will often obtain static data from third party suppliers which identifies MiFID reportable instruments. The FCA expects that firms will undertake due diligence to ensure the quality of the static data it uses to evaluate reportability. Further care has to be taken to ensure that the coverage of the static data provided is well understood. For example, whether the data covers prescribed markets or not.

Option Approach Considerations Issues
1 Obtain a third party data source of the full set of reportable MiFID instruments 1. Cost, Daily UnaVista MiFID securities file is £12,000 p.a. whilst the derivative file is £10,000. Derivatives may not be required if only a small number of derivatives are traded as these can be looked up manually

2. UnaVIsta list whilst of reasonable quality is not 100%

3. Periodic reportability testing would be considered necessary
2 Obtain reportability information on a security by security basis

Kaizen are working with SIX who will be able to provide data on a per ISIN/Valor basis for both Securities and Derivatives
1. Costs: there may be one-off set-up costs associated with this solution and the cost per ISIN/Valor may be high

2. SIX reference data set whilst of reasonable quality is not 100%

3. The firm will have to capture the provided reference data to avoid having recurring costs

4. Periodic reportability testing would be considered necessary
3 Use existing data sources to identify instrument reportability

Using Bloomberg/ ESMA list of shares and internet research to manually determine whether each instrument newly traded is reportable
1. Reportability can change over time particularly with instruments becoming reportable

2. Time and resource will be required for this

3. A good understanding of reportability is needed as is knowledge of the data sources where searches are required

4. Periodic reportability testing would be considered necessary
Expected lower cost that prior two options

It is possible that SIX or other suppliers are already providing reference data to the firm which should be investigated as there may already be MiFID reportability flags in the provided static data

4.6. Over-reporting

Due to the difficulties in identifying reportable instruments, the FCA will accept transaction reports in respect of instruments which fall outside the scope of SUP 17.1.4.

The FCA does however request that firms take reasonable steps to prevent over-reporting and that any such transaction reports are complete and accurate.

Over-reporting should not be confused with duplicate reporting where the more than one transaction report is made in respect of a single trade. Duplicate reporting constitutes a rule breach.

4.7. Dual listed Securities

The transaction reporting requirement relates to financial instruments which are admitted to trading on a Regulated Market or Prescribed Market regardless of whether the transaction is conducted on such Regulated Market or Prescribed Market. Consequently the firm is required to report transactions in dual listed securities (where one of those listings means the financial instrument has been admitted to trading on an EU Regulated Market) even if the transaction is conducted on a non-EU exchange.[8]MW issue 22 (August 2007) For example: Lukoil is listed on the Moscow Stock Exchange but is also admitted to trading on the LSE. If a London trader from the firm executes a trade on MOEX for Lukoil this will be reportable.

4.8. Depositary receipts

An issuer with a listing in a foreign country will often seek to raise capital on an overseas market by issuing depository receipts. The depository receipts (DRs) are securities which are admitted to trading in their own right and with their own ISIN identifier. Where listed on a regulated market the depository receipt is reportable in its own right.

Transactions in an instrument on an overseas exchange such as MOEX which has a mirror DR admitted to trading on the LSE, a regulated market, are not transaction reportable (unless it is also a dual listed security per the above). An example of this would be trades on MICEX in Rosneft which would not be reportable whilst trades in the Rosneft GDR would be. However, Lukoil is dual listed on both the LSE and MOEX. As such a trade on MOEX by a trader from the firm would be transaction reportable to the FCA.

Similarly, trades in DRs issued on a non-EU market by companies with securities admitted to trading on a regulated market are not reportable.

4.9. Exchange traded derivatives

Exchange traded derivatives are reportable only where they are traded on an EU regulated market. ETDs are dealt with in section 14.

4.10. Exception for Commodity Derivatives, Interest Rate Derivatives and Foreign Exchange Derivatives

FCA have stated that firms do not need to provide reports for transactions in commodity derivatives, foreign exchange derivatives or interest rate derivatives (collectively referred to as non-securities derivatives). Following an agreement being reached between CESR and the EU Commission such that regulators do not need to require firms to report transactions in non-securities derivatives admitted to trading on regulated markets, FCA will collect transaction reports directly from LIFFE, the LME and ICE futures Europe for such trades and will enable such information to be made available to other EU regulators should they require it.[9]MW issue 28 (June 2008)

For the avoidance of doubt, securitised instruments such as ETFs (Exchange Traded Funds) and ETCs (Exchange Traded Commodities) are reportable irrespective of whether they reference commodities or not as they are admitted to trading in their own right as securities.[10]TRUP v3, section 3.2b, page 9

4.11. Securities for which an ISIN is unavailable

In some rare circumstances, trades may be executed in respect of instruments which have been admitted to trading on a regulated or prescribed market but an identifier, typically an ISIN code is not available. In such instances the trades may fail to be reported on a T+1 basis but must be reported when the identifier becomes available, both the historic trades and of course all subsequent trades must be reported. An example of such are Grey Market transactions which are discussed in section 5.8.

4.12. Monthly reportability testing

In each case whatever option your firm follows in assessing reportability it is recommended that a regular assessment of the completeness of reporting and over-reporting is carried out as part of your transaction reporting quality assurance processes.

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1. SUP 17.1.4
2. Under MiFID I reporting of client side transaction reports is super equivalent to MiFID I and is therefore at the option of each Competent Authority. Reporting of the exchange facing trades therefore meets the directives mandate.
3. MW issue 28 (June 2008)
4. TRUP v3, section 3.2b, page 9
5. MW issue 22 (August 2007)
6. MW issue 28 (June 2008)
7. MW issue 28 (June 2008)
8. MW issue 22 (August 2007)
9. MW issue 28 (June 2008)
10. TRUP v3, section 3.2b, page 9